When some people file for bankruptcy, they wonder if opting for Chapter 13 is a good idea. (Chapter 13 bankruptcy deals with payment arrangements.)
If you’re unsure whether Chapter 13 is appropriate for your financial situation, read its advantages and disadvantages below.
Pros of Chapter 13
Chapter 13 has these upsides:
-Chapter 13 stays on your credit report for only seven years: Unlike Chapter 7 bankruptcy, which affects your credit score for a decade, Chapter 13 remains on your record for three years less than that. Seven years can buy you time to ameliorate your credit.
– Its repayment plan allows you to pay off your debt(s) within months or years: Some creditors demand that debtors pay their debts in full. But many debtors are unable to because they live paycheck to paycheck or have other financial troubles. When you apply and receive approval for Chapter 13, creditors can no longer pester you about your debt.
-You can keep your assets: Though Chapter 7 permits you to make exemptions for your possessions, you still have to put some of them up for collateral. With Chapter 13, you can keep both exempt and non-exempt assets as long as you make your payments on time.
Cons of Chapter 13
There are some drawbacks to this type of bankruptcy:
-You need to meet certain debt limits to qualify for Chapter 13: If your secured debt limit goes over $1,257,850, and your unsecured debt is more than $419,275, you won’t be eligible for Chapter 13.
-A Chapter 13 payment plan goes on for three to five years: It could take up to half a decade to pay off your balance.
If you have any questions about how Chapter 13 works, it helps to seek legal assistance for help.